June 18, 2015

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The biggest challenge facing Indiana’s manufacturing sector is not that there aren’t enough jobs. Rather, it’s that there aren’t enough students pursuing careers in manufacturing and developing the specialized skills to thrive in the field.

Speakers at a breakfast event Thursday focusing on the state’s advanced manufacturing and logistics industry said the public and private sectors need to work together to bolster career counseling, internships, high school training and other programs that boost awareness of the career opportunities in manufacturing. The event was presented by IBJ and Conexus Indiana, the state’s advanced manufacturing and logistics initiative.

“The biggest challenge in manufacturing is to maintain the flow of employees into the sector,” said Ball State University economist Michael Hicks, who at the breakfast presented his annual Manufacturing and Logistics Report Card for the state.

This year’s report, like those issued in prior years, included an abundance of good news. The state maintained an “A” in four of the nine categories—manufacturing industry health, logistics industry health, tax climate and global reach.

The state got the worst mark for worker benefit costs (“D+), because of rapid increases in health care costs. It scored a “C” for human capital, which is up from last year because of improvement in high school graduation rates. Indiana could have moved up further were it not for low graduation rates among Indiana community college students.

Hicks said the manufacturing sector in Indiana and nationally is doing far better than media headlines might suggest. He said only a small number of jobs are being lost to overseas factories, and the sector still pays far better than most industries. New hires in manufacturing are making an average of $20.06 an hour—nearly $42,000 a year. In contrast, the average new Hoosier worker across all industries makes just $12.13 an hour, or $25,230 a year.

Part of the misperception stems from dramatic leaps in manufacturing productivity and the impact they have on employment. Output by a typical worker has nearly doubled since 2000, Hicks said. Between 2000 and 2010, 87 percent of job losses were driven by increases in productivity.

Despite the downward pressure productivity gains put on employment, manufacturing remains a giant part of the Indiana economy, with 518,000 workers as of April, according to the U.S. Bureau of Labor Statistics.

Employment peaked at about 756,000 in 1973. It stood at 550,000 just before the Great Recession hit and slumped as low as 425,000 in the depths of the recession.

But in terms of manufacturing output, this is the golden age for the sector. Domestic production hit a record in 2014, is on track to do so again this year and probably will again in 2016, Hicks said.

Yet many of the speakers at the event worried about a mismatch between the advanced skills needed for today’s manufacturing jobs and the skills of those entering the workforce actually have.

“Our workforce is increasingly less qualified for the jobs of the 21st century,” said Lt. Gov. Sue Ellspermann, one of the featured speakers.

One reason industry and government leaders are worried is that a huge wave of baby boomers is on the verge of retiring from manufacturing positions. For example, 40 percent of the 8,000 workers that Fiat Chrysler Automobiles employs at its Indiana factories will be eligible to retire within 12 years, said Brian Harlow, the company’s vice president of manufacturing for North America.

Steve Dwyer, CEO of Conexus Indiana, said efforts to expose high school students to the field are helping increase the pipeline of workers. He said post-secondary students can obtain industry-recognized credentials that allow them to move directly into skilled manufacturing positions in fields such as automotive, aerospace, biosciences and pharmaceuticals.

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Behind the News columnist

A native of Kentucky, Andrews has worked at Hoosier newspapers since graduating from Indiana University in 1987. He covered education at the Journal and Courier in Lafayette before joining IBJ in 1991. He later was a business reporter and the business editor of The Indianapolis Star. He’s been writing his Behind the News column for IBJ since rejoining the newspaper in 2000. Andrews and his wife, Kathleen, have a son in college and another living in Colorado. They live in the Nora area with their two dogs.

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